VOL. CLXXXVII– NO.3 – INDEX 175
JANUARY 15, 2007
This article is reprinted with permission from the JANUARY 15, 2007 issue of the New Jersey Law Journal. ©2007 ALM Properties, Inc. Further duplication without permission is prohibited. All rights reserved.
By Timothy P. Duggan
The United States District Court for
the District of New Jersey recently
affirmed a bankruptcy court decision
finding that two annuities owned by a
Chapter 7 debtor were not excluded from
the bankruptcy estate under Bankruptcy
Code § 541(c)(2). Hill v. Dobin, (D.N.J.
Dec. 5, 2006). The District Court con-
cluded that although the annuities were
subject to a restriction on transfer, they
were not trusts, resulting in a fatal flaw to
the debtor’s argument.
The debtor purchased two annuities
prior to filing for bankruptcy protection.
The plans were neither ERISA-qualified
plans nor pension plans, but purchased as
retirement accounts. The debtor listed the
plans on Schedule B of her bankruptcy
schedules subject to a disclosure stating
“not property of Debtor Estate — for
notice purposes only.” The Chapter 7
Trustee filed an adversary proceeding
seeking declaratory relief in the form of
an order declaring that the two annuities
were property of the bankruptcy estate.
After limited discovery was conducted,
the Chapter 7 Trustee moved for summa-
The issue before the bankruptcy court
was whether the two annuities qualified
for exclusion from the bankruptcy estate
under Bankruptcy Code § 541(c)(2).
Under this section of the Bankruptcy
Code, “a restriction on the transfer of a
beneficial interest of the debtor in a trust
that is enforceable under applicable non-
bankruptcy law is enforceable in a case
under this title.” 11 U.S.C. § 541(c)(2). To
qualify for exclusion, the debtor must
show “(1) the asset represents the debtor’s
beneficial interest in a trust, (2) there is a
restriction on transfer, and (3) the restric-
tion is enforceable under applicable non-
bankruptcy law.” The District Court noted